So you are trying to turn your finances around, however, you don’t really know where to start. Pay off debt or save money? Well what about doing both at the same time . . .
When it comes to finances, it is always a good idea to have some extra money saved, should you need it in the future and at a moment’s notice. However, the reality is you may have a fair bit of debt you need to pay off as soon as possible too.
With that being said, it is a good idea to create a plan that will allow you to manage paying off your debt and simultaneously saving the money you need.
Here are 3 ways to pay off debt and save at the same time.
1) Create a Budget
First and foremost, if you want to improve your finances for a variety of reasons, your best bet is to create a budget. While a budget is meant to help you manage your money and track your spending, when you are devising your budget you will specifically be looking at how much money you have coming in as well as how much you have going out.
Here you will get a sense for how much you owe each month and how much overall debt you have. At this point, you can look at how much money you need to pay off your debts each month and if there is extra money you can put away into your savings. Even if you can only save $25-50 each month, while keeping up with your debts, this is still better than nothing.
In the end, you are still doing what you have set out to do which is to continue to pay down your debt and save some additional money in the process.
2) Cut Back on Your Spending
After you have organized your budget and have a better idea of how much you owe and how much money you have coming in, you will also be able to identify the areas where you might currently be overspending.
One key question you can ask yourself is, “are you spending too much money on food and household goods each month?” If your response is ‘yes’, then maybe you can look to cut back on what you are buying as well as looking to make these purchases for less somewhere else.
In addition to looking for better deals, are there any services or items you typically buy that you can stop buying altogether? For example, are you currently paying for a gym membership you don’t use? Are you hitting the malls or doing too much online shopping? Are you paying a lot for cable television, and instead could do without it? Depending on your situation, there are likely to be areas where you can save and this can make a big difference in the amount of money you are spending each month.
Ultimately, with the extra money you are saving here, this can enable you to increase the amount of money you are transferring into your savings account each month. In turn, you can even then use some of this income to pay off your debts as well.
3) Refine your Debt Payment Strategies
In this final example, perhaps you are saving money, however not able to simultaneously pay off much of your debt. It is at this point where you may want to look at revisiting your current debt payment strategy and make your debt repayment plan work more effectively for you.
With that being said, are you only able to pay off the minimum balance on your credit card or credit cards? If you are finding it challenging to pay off this debt and not really feeling like it is making a difference, it might be best to explore other debt relief options.
For example, taking out a debt consolidation loan may help to speed up your debt repayment.
Here you can combine all of your credit card debt – or personal loans into one loan with a lower interest rate. This type of debt repayment adjustment could really make a difference and allow you pay off your debt at a much faster rate.
In this instance, you can step up your debt repayment as well as saving some money, without having prioritize one over the other.
As mentioned, you don’t have to compromise or neglect one financial element or the other. By first budgeting and making adjustments to both your current method of savings as well as debt relief, both goals can be achieved.
When all is said and done, you never want to throw yourself into more debt or develop bad credit, in order to save more money. Instead look for ways of finding a balance between both actions that will be manageable for you.